Interdealer brokers (IDBs) have traditionally been publicity-shy, but a strong performance during the financial crisis has thrust this fairly low-key sector into the limelight.

An IDB acts as an intermediary between dealers at investment banks, enabling banks’ traders to do large deals with one another anonymously. For example, assume a trader wants to buy two million shares in company A at 50 cents each. They check prices and availability with an IDB. If the trader is happy with what the IDB has to offer, the IDB will execute the deal. In return, it takes a small percentage as commission, which can be very lucrative, particularly in volatile markets. Because IDBs get paid whenever people trade, they make money whether the market is rising or falling. High levels of price volatility in the stock markets are beneficial to them.

Key players

Five big firms – ICAP, Tullett Prebon, GFI, BGC and Tradition – dominate 70% of the market, according to analysis by Celent.

Roles and career paths

Interdealer brokers recruit graduates for voice and electronic broking. Voice brokers speak to clients on the telephone and execute trades around more complex products, which typically require more discussion or explanation. Electronic brokers use computer screens to check client needs and execute deals. Electronic broking is about speed, trading cash or equity products in large volumes at the right price, before the client’s competitors. Brokers usually specialise in a product, which can range from options or futures to fixed-income products. The career path is junior broker, broker, desk manager, director, head of division.

Pay and bonuses

Starting salaries range between $40k and $50k, according to IDB headhunter Search Partners. The spread between base salaries for senior brokers is large – $120k-220k. The general rule is the more complex the product, the higher the salary. But IDBs make most of their cash from a percentage of the money they bring in for the company, anything from 35% to 50%, with more confident brokers pushing for a bigger cut and smaller base.

Skills sought

Interdealer broking is about relationships, so if you’re not a people person, don’t apply. In fact, such is the bond between broker and client that, if a successful broker leaves for a competitor, they’ll often take their business with them. “The ability to develop strong client relationships is a key part of the job, particularly at the early stages of your career. In order to develop a long-term relationship with any client you need to be able to develop a bond of trust and understanding,” says Mark Scally, head of human resources at Tullett Prebon. This involves a lot of client entertainment. Damien Lee, managing director of Search Partners, says a junior broker can spend three or four nights a week entertaining, “and you’re still expected to be at your desk at 7am the following morning.” You also have to keep clients sweet on a more professional basis. “On the trading floor of an investment bank, traders take a position and therefore potentially a risk. Our business is more about swift execution – ensuring we can trade our clients’ positions fast. Brokers need to be able to react quickly to find solutions to individual clients’ needs,” says Scally.